Buying a Car With Cash? Here’s What to Consider
Buying a car with cash means you won’t have to worry about monthly loan payments, but you’ll also miss a big chance to build up your credit score.
As you go car shopping, consider the pros and cons of paying cash for a car and whether it’s right for your financial situation.
Understanding what it means to buy a car with cash
To “pay in cash” for a car means paying the full cost of the car up front, rather than financing most of it through an auto loan.
This doesn’t have to involve handing over a giant wad of dollar bills. In fact, you have several choices, including:
- Personal check
- Cashier’s check
- Wire transfer
- Money order
Pros and cons of paying cash for a car
Getting your car with cash can help keep you debt-free, but you might miss out on dealer incentives and other advantages.
| Pros | Cons |
|---|---|
You’re not accumulating debt: You avoid having to fit a new debt payment into your budget. You own the car outright: You’ll have a new asset that you can borrow against in the future if needed. You’ll avoid paying interest charges: Any interest you would have paid can go toward other things. | You’ll have less cash on hand: After purchasing a vehicle, you might not have enough to cover emergencies. You may have a limited selection: If you stick to your cash budget, some models will likely be out of your price range. You may not be able to access some dealership incentives: Many dealers offer rebates and other incentives, but often only if you finance your vehicle. You’ll miss a chance to build credit: By using an auto loan, you could build up your credit score. |
How to buy a car with cash
The steps for purchasing a car are mostly the same whether you pay cash or use financing, but there are some things to consider as you go through the process if you decide to pay up front.
1. Set a budget and start saving
The first step to buying a new car is deciding how much you can afford to spend.
If you’ve decided to pay cash, try not to wipe out your emergency fund in the process. A rule of thumb is to keep three to six months’ worth of living expenses on hand to cover unexpected costs.
Also, make sure to save enough money so that this big purchase doesn’t leave a hole in your household budget.
2. Shop around for a car
Next, decide what kind of car to buy and whether you want to get a new or used vehicle.
If you go with a new car, you can visit a dealer or even use an online tool that lets you “build” your new car from scratch using a base model.
If you’d rather buy used, do some research on what’s available and check our list of used car resources.
Either way, be sure to account for the whole cost of ownership.
3. Negotiate the vehicle price
Once you know which car you want to buy, research the car’s value to see how it compares to the dealer’s asking price. You can use an auto price guide for this, like Kelly Blue Book (KBB) or Edmunds.
Be sure to ask the dealer about the “out-the-door price,” which is the total cost of the car, plus taxes and dealer fees.
Some of these costs (like appearance protection packages and extended warranties) can be negotiated, while others (like sales taxes and titling) cannot.
Consider no-haggle car buying
If you want some deal-making strategies, check out our guide on how to negotiate a car price. But if negotiating isn’t for you, consider no-haggle car buying, which allows you to purchase a car for its sticker price. Just be aware that you may end up paying more if you don’t negotiate.
4. Gather your funds
After settling on the price, tell the dealer you want to pay up front, and find out which payment methods they will accept. Of course, some methods (such as writing a personal check) may take longer than others (such as using a cashier’s check or money order).
5. Complete your paperwork
Finally, you’ll complete all the necessary forms, submit your payment and take the keys to your new vehicle. But make sure you ask questions or discuss any concerns with the dealer before you drive off the lot — especially if you’re buying a car with cash.
Should you pay cash for a car?
As described above, buying a car with cash has its pros and cons. If you have the funds, and if avoiding debt is important to you, then paying cash could be a great move.
If, however, you need to build your credit, then consider going with a loan instead, particularly if you can get a good interest rate. (And if you’re unsure about your credit score, you can check it for free with LendingTree Spring.)
There’s no one-size-fits-all answer to whether it makes sense to pay cash for a car, so weigh your options carefully before deciding.
Frequently asked questions
It’s not all that unusual to pay for the price of a car up front. While some dealerships may not accept large cash sums, many will be open to accepting cashier’s checks from your bank or a wire transfer into their account.
Potentially. Federal law requires businesses, including car dealerships, to report cash payments of more than $10,000. If the price of your new vehicle is above that amount, you will likely be asked to fill out some additional paperwork to meet this requirement.
There is almost always room to negotiate some aspects of a car’s price, even when you’re paying cash for a car. As noted above, some dealer fees are non-negotiable, but others leave some room for negotiation.